Communicating With Social Media

Technology is literally leaping off the pages of our old childhood comic books, right onto the front pages of the world’s investment journals.

For the uninitiated (if indeed they still exist), Facebook is one of the many social networking tools changing the way we humans communicate. It’s happening right now, even as your editor virtually writes to you this morning, and it’s big news for investors, marketers, entrepreneurs and the cadre of pimply whizz-teens who are inventing this brave new world.

User content driven sites are nothing new, of course, nor are the seemingly inordinately large paydays for their creators. Three years ago, media mogul Rupert Murdoch created quite the stir when he famously purchased Intermix Media, the owners of Myspace (another social networking site) for over half a billion dollars.

“To find something comparable,” Mr. Murdoch said of his purchase at the time, “you have to go back 500 years to the printing press, the birthplace of media – which, incidentally, is what destroyed the old world of kings and aristocracies. Technology is shifting power away from the editors, the publishers, the media elite. Now it’s the people who are taking control.”

And indeed they are. Since Murdoch’s NewsCorp bought MySpace, some three years ago now, there has been a flurry of high profile Internet deals cut. The latest industry buzz came when Evan Williams, CEO of the “microblogging” service, Twitter, recently turned down a $500 million deal from Facebook.

So yes, there’s some very real cash sloshing around the virtual marketplace.

According to the site’s own data, Facebook currently has over 200 million users, more than half of whom log on at least once every day. This heaving mass of individuals sort themselves into some 25 million interest groups and share over 1 billion pieces of content (web links, news stories, blog posts, notes, photos, etc.) each week.

If these figures fail to impress, or if this new-fangled technology all seems a bit “young and hip,” consider the following points:

1) More than two-thirds of Facebook users are outside of college

2) The fastest growing demographic is those aged 35 years and older

3) The technology sector is one of only three representatives in the S&P 500 that is actually “up” for the year (consumer discretionaries and materials being the other two).

These are strange days, indeed, but make no mistake about it: a new era of investing is coming to a weblisting near you.

Imagine if someone told you, let’s say five years ago, that Wall Street’s investment banking model would be gone before the end of the decade; that the largest holders of U.S. mortgages would be reduced to mere penny stocks; that GM, Ford and Chrysler would be on the verge of bankruptcy…and that some guy who goes to work in tracksuit pants as the CEO of something called a “microblogging service” would be in a position to turn down a half a billion dollars from another company which operates a “virtual online social networking tool.”

Eh? Come again…?

You might have reacted like your ancestors probably did when the town loony told them that one day intercontinental commercial flights would be commonplace…that everyone would trade in their horse and buggy to travel around town in an automobile…that, in the future, we’ll be able to talk to each other with a little thing called a “cellphone,” which will have an integrated “digital camera” and “Internet capabilities.”

It wasn’t long ago that these concepts seemed unfathomable…but these things we all take for a given now. In fact, you can now follow new posts and content on The Daily Reckoning by clicking here. Give it a try and let us know what you think.